Oil sector won't save Iraq by itself

Yes, Iraq will have a budget surplus thanks to the oil sector, as much as $50bn. That's of course good news as it gives the government options, and is an indication of lessening attacks and corruption in that sector.

The oil sector in Iraq, however, has always traditionally accounted for over 95% of foreign exchange earnings, but even in 1997 employed only 0.6% of the population, according to the 2004 Journal of Economic Perspectives. (sorry the full text isn't available free). That split is typical of the oil industry: high capital, low employment.

Therefore it is unreasonable to expect the oil sector to provide enough jobs to promote security, even if it were to fully recover, and beat persistent corruption. So the question then is what will the GOI (Government of Iraq) do with the money. The right thing would be to invest heavily in industry and education to promote the economy and keep people from the temptation of accepting free-lance insurgent work. Supposedly the insurgents were offering over $500 to place an IED, which is a good deal if you're hungry. We need to start thinking of security as an economic competitor as well.

Big four sectors in Iraq in 1997:
government (20.15&)
wholesale and retail trade (19.3%)
agriculture (18.35%)
unemployment (17%)